1172: Best Market for Investing, New Construction vs Rehabs, Tax Liens & Deeds

The reason I invest in real estate is because I was previously doing a 401k and put my money there and doing other, you know, traditional retirement plans. That just doesn't work, didn't work for us for 10, 15 years that we were doing it and was looking for something different. So I was doing a lot of research and listen to a lot of podcasts and found real estate as being a much better avenue for creating wealth and creating cash flow. Our first investment property actually happened by accident because of not being able to sell a previously owned house that we had and moving out of that area. So it turned out to be a really good thing for us. So after that, that made me really interested. The first intentional investment property that we purchased was in Florida. I found the Creating wealth show and Jason by him being a guest on another podcast that I had been listening to. It was about creating passive income and he was a guest on that show and I was impressed with his knowledge. So from there I made my way to his podcast. Right now we have a total of 10 properties. We decided to go all in. I mean, we'd been doing 401k and other traditional retirement plans and investments that most people are comfortable with with really terrible results for lots of years. So I was okay. So we actually liquidated everything we had in our 401ks, paid the penalty on all of that and are doing much, much better with real estate and very happy about it. But I think it just comes down to being comfortable with the education. So I felt like there's plenty of information out there about real estate. There's lots of people with great track records. And so I think if you follow a path of success, that it's a lot easier to replicate and duplicate. So I felt like I was following other people's paths of success, so I felt comfortable.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting technique and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your financial Independence Day. You really can do it. And now here's your host, Jason Hartman, with the complete solution for real estate.

Investors, welcome to episode 1172. 1172. Thank you so much for joining me today. I have one of our investment counselors here and she has not been on the show in quite a while. Sarah, welcome back. How are you?

Hey, Jason, thanks for having me back. I'm good, thanks.

Well, it's been a long time now. Why have you been so shy lately?

You know, it's just been busy. Busy. Actually, I had a client a few weeks before, Meet the Masters mentioned he heard me on an old podcast and I think we were talking about just taking the first steps and getting started, you know, and he said that that was really a call to action for him. So I thought, you know, I better get back on and keep inspiring.

Well, welcome back. Welcome back. So we have kind of several bullet points to talk about today. Here's a question that people always ask me. I know they always ask you this question and they always ask all of our investment counseling team this question. What's your favorite market? Or they might say, what's the top market? Well, the favorite market is a very difficult question to answer. It's like, Sarah, you're a mom, you have two kids, you know, who's your favorite kid? Even if you have one, you don't dare, you don't dare. You don't dare say, right? Depends on the day, right? Fair enough.

But.

But it's pretty easy to say what the top market is in terms of volume. But remember, that's dynamic also. It changes all the time. But give us an overview of that right now, at least for you. This isn't for everybody, but it's for you.

So for me, what makes a top market is really the team, number one, and then the inventory. So number one, do we have good follow up, constant communication, updates, you know, just, is it going to be smooth working in that market with that particular seller, property manager? What's the feedback like from the clients? That's number one. And then number two obviously is do the numbers make sense? So we're constantly reevaluating different markets and different teams. I would say right now we're doing a lot of business in Jacksonville, Florida, which is the brand new construction, lots of deal flow going there. Memphis has been a market we've been doing business in for many years. We work with several different sellers and property managers in that market. So it's been steady. Still do a little bit in Little Rock, we're doing a bit in Dayton, Ohio and a little bit in North Indiana as well as Indianapolis. So those are our probably top, you know, Five or six markets there for you.

Yeah, yeah. Okay. Okay, good. And in terms of new markets, we at Meet the Masters we launched our Pennsylvan market. We are working on a property tour. I'm not sure if it'll be in that market or where, but we were are working on some property tours and you know, one of the things the listeners may not understand that I would like to share with them is that property tours, we don't do them as much as we used to. And the reason they are a little more scarce is because with the constricted inventory market that we've been in for the last few years, it's sort of hard to pull together a property property tour with enough inventory so that clients when they come out to purchase properties in that market, they're not disappointed. Clients can go do their own tours and we can arrange those for them on a one off basis of course and they can go look at properties with our providers. But to do an actual organized tour with several clients, it's a little harder, isn't it?

It is because the inventory is changing on a daily and or weekly basis. And so yeah, we definitely don't want to set up our clients for disappointment. The add value for doing these group property tours is really the educational component. So in addition to touring properties, we typically do a one day educational seminar that you put on and you educate the clients. And so if you're a beginner investor, that's awesome that you can get the education and tour the market all in one. You know, maybe if you've been to some of our events in the past and you're just looking to buy, a one on one property tour might be a better fit for you. We can accommodate that as well.

Sure. Okay. Okay, good. So did you have any comments though on new markets in general, you know, things to watch and so forth?

No, I was going to mention Pennsylvania. I'm excited to be working with this new team and we have our first two properties under contract with them. We're getting through inspections on the first one. They've agreed to come back and fix any repairs that came up in that report. So that's good. Typically when we launch a new market, our seasoned investors will come in and be the first buyers there. And you know, you won't see us really mass advertise or mass market these properties until we've closed a couple deals. And so yeah, so far things are going smooth there. They seem to be doing really nice rehabs, new updated bathrooms and kitchens and such. So that's that's exciting to see because as. As you know, Jason, the rehabs aren't what they used to be in all the markets. And that's another thing to keep an eye out for is nice, fresh rehab.

To sound so cynical. But neither are the rehabbers.

Yeah, well, we can go on about the. Some of the rehabbers.

Let's let our listeners in on the inside joke there. Our cynicism, if you will. You know, look, like I've said before, a booming economy is not good for human character. And in the last several years, it feels. And, Sarah, you've been with me about 11 years now. Are we in 12 years yet?

12 in May.

Yeah, 12 years in May. Wow. Next month, Happy anniversary.

We actually always do an anniversary podcast.

We really should celebrate and mark the occasion, you know, so let. Let's plan on doing that. But I'll tell you, I don't think I've ever seen it as bad as it's been in the last couple of years in terms of just people who are acting like weasels. You know, it's like you can really see their character when you have a booming economy. They don't go the extra mile. They don't take care of people. It seems like it. We're always having to push and push and go to bat for our clients to get what you would think are just the most reasonable, simple things done and taken care of. Any comments on that, without being too terribly negative?

It is what it is, and that's why we monitor these different relationships. Everything, all the inventory is very spread out these days. You know, when we first started working with these rehabbers, we would get.

And rehabber is synonymous with local market specialists.

Okay, Local market specialist. Turnkey provider.

Lms.

Lms. Yeah. So we used to get a ton of volume each month from each provider, and so they would really rely on us to move their properties. But now we're finding. Finding that, you know, instead of getting, say, 10 to 15 or 20 deals a month, maybe we're getting four or five a month, and the inventory is slowing down, so we're having to work with multiple people in the same market, you know, to keep up with the demand. And it's kind of a good thing because it sort of forces them to compete with each other and keep up with their competition, but it does really weed out the good and the bad. Unfortunately, we're starting to see that some local market specialists are not communicating as well as. As they once were. They're not as hungry for the business, perhaps, but I think we're starting to, starting to see a little bit of a shift. I'm definitely, in fact I had a local market specialist from back In, I think 20, oh, maybe 2009 we were working with in one of our markets and he was a good provider and then he just didn't have inventory for a while. Now he's come back and reached back out to us. So there's definitely a benefit to having been here working in the network for many, many years and just having great contacts. And you know, as you say, we want to recommend markets the day they make sense. And so sometimes we start working with somebody in a market and then the numbers stop making sense. At some point we stop recommending them and they might come back around years later.

That's more a discussion of because the market changes and prices appreciate and the rent to value ratios get out of whack. So for our clients who already purchased there, you know, they can just sit on those stabilized properties and reap the profits or they can do 1031 tax deferred exchanges and exchange one property for two properties or even three properties. So that's great, but we won't recommend new clients moving into that market. But what I'm sort of referring to is just my, my cynical view of human nature recently and just greed. And I tell you, we have had to terminate more relationships in the past couple of years than I think ever in my now going on 16 years in the business of doing this, just 100% investors. It's just been really something. I mean you really do see people's true colors when they're just trying to grab every marble, you know, like every dollar. It's people scrambling and you really can tell who's got good character and who doesn't. And sadly a lot of people, they fail the test. So we are not going to work with people who have bad character. That's that one. Enough of my cynicism will be more positive now. But hey, look, we, we just want to be really transparent with you listening. Okay. So it's not like I'm saying anything new. Okay.

I think that's, you know, one of the things our clients really appreciate about us. You know, and I tell my clients this on a daily basis. I'm pretty transparent about how I feel about, you know, our different relationships. And you know, sometimes they have good properties, but it's more of a enter with caution really. Don't sugarcoat. So my clients know that you know that.

That's definitely. I do know that. I do know that. Okay, let's talk about some specific clients and we've got a few mentions that we just want to share with you. We all appreciate your business so much and we appreciate you coming to our events and stuff. So, Sarah, I'll let you take it away.

Yeah. So I do want to mention a client. He wasn't at this Meet the Masters, but he came many years ago all the way from Switzerland. His name is Mark and he has purchased several properties on his own, but has recently been referring some of his. His friends and colleagues. And so his client Georges just put nine properties under contract today in Memphis and Dayton. Yeah, he's doing a portfolio loan and so we're really excited to be working with him.

Yeah. Well, thank you for the referral. Mark and Georges, welcome to our network and we look forward to working with you and helping you with those nine properties you just purchased and helping you build a even much bigger portfolio. Is Mark's friend from Switzerland as well?

Yes. Yes.

Yeah.

Fantastic. That's great. And we did have someone at Meet the Masters. I think it was Martin. Forgive me. Yeah. Martin, who flew out all the way from. Not just Australia, not just Sydney, Australia, from Perth, from the other end of Australia. So that is. That was a long flight. And I think he said he flew 22 hours to come to Meet the Masters, so. Wow. We are honored. Thank you so much. We've. We've had many people fly from around the world before, but that's one of the longest, I think.

Yeah, that was really awesome. And we did have some of our east coast clients out from New York and New Jersey. We had Kevin from Charlotte. He just put three new properties under contract in Memphis. I talked to him today, so congrats on that.

Congratulations, Kevin.

Yeah, he's gearing up for a vacation here, so we had a good chat. Gina and David from Northern California had a nice dinner with them at Meet the Masters. They just closed on a couple of duplexes that were brand new construction in Jacksonville. So that.

And hey, we gotta say one more thing about Gina and David. They were also tearing up the dance floor at Meet the Masters when we had our Rod Stewart tribute on Saturday night. So good job on that.

Yeah, they are so much fun when.

They played have I told you lately that I love you? They were doing a slow dance and I was kind of bugging them a little bit. But.

I put the. We had these inflatable guitars and inflatable microphones. I think it was Gina who was kind of lip syncing it a little bit. And so as they were Doing the romantic slow dance. I stuck the microphone right in her face and expected her to sing. But hey, you know, well, you know.

Gina and David are just a great example of people who really get the mindset of not only investing, but just life in general. They're real positive, upbeat.

I love them.

Yeah.

And they're just a joy to be around and to work with.

So. And they were on the podcast a while back when we had our Oklahoma City property tour, I think it was.

That's right.

We were walking back from lunch and we did a, literally an in the street interview. So that was great.

They've done big things since then, so it might be time to get an update.

Yeah, good, good stuff. Well, they're, they're always welcome that we always, by the way, we always love having our clients on the show. So any of you listening that want to be on the podcast, share your story with the community. Everybody loves hearing the client case studies. So any of you just reach out to us through Jason hartman.com or through your investment counselor. We'll be happy to have you on the podcast. Okay, Sarah, who else?

Another longtime client that's been to many of our Meet the Masters events. And darn it, I wish I would have looked up the very first one that he attended. But he's close to me here in SoCal in Artesia, and his name is Joe, and he's got a new construction property under contract now in Jacksonville as well.

That's right. Yeah. Congratulations, Joe.

Yep, he's doing good things. We've got some brand new clients from South Dakota, Rhett and Katie. They're also doing new construction in Jacksonville. We've got Dan and Jeanette who scheduled their property tour. They're doing, I guess it's a two on one property tour, but Dayton and Indy, and they're also first time investors. So just congrats to all of you guys for, you know, taking the first step. And, and to our, you know, longtime clients for just continuing to grow your portfolio. It's, it's really great to see you guys building.

And Sarah, it would not be right if we did not mention, though, one more thing. We want to apologize for the 1983 people we didn't mention. So.

You'Re all your other clients and all the clients of all the other investment counselors, too. So, you know, this is just a sort of a recent thing from Meet the Masters and in, you know, the last two weeks or so. So we, we apologize if we did not mention everybody. So I just have to say that.

Absolutely we would need like a 10 hour long podcast.

Yeah.

And we would probably be boring all the people who weren't mentioned if we did that. So anyway, but thank you all for your business and support. We, we love you and we appreciate it. Sarah, New construction versus Rehabs. Maybe we can kind of wrap up with that. One of the things I really enjoyed and we're going to have an upcoming podcast. I'm headed out to China in just a few days. I'm going to go to South Korea and China, I'll be doing podcasting from there. You know, China is such a big economic force. Well, so South Korea, of course. So I'll definitely be doing a lot of podcasts from there. But one of the things that I just love that you set up at Meet the Masters was the home inspection presentation and we're going to have them on the podcast after I return. But new construction versus Rehabs, what are your thoughts on that?

Well, I think that you should have both in your portfolio. I think there are benefits to both. When you're looking at rehab properties, they almost always look better on paper. And what I mean by that is, you know, when you're looking at the Performa, the cash flow looks better. But what you need to take into consideration is that there's almost always going to be a little bit more maintenance on those properties. And so that's the big question mark that we don't know. With new construction you're more likely to have a lot less maintenance, especially in those early years and so especially for brand new investors that are just getting started. I love the new construction because it allows you to get into the game. You're not worrying about a bunch of maintenance up front. You're getting to know the process of just, you know, collecting rents and you might get a call here and there for maintenance, you know, in the first few years, but not much, you know, they don't cash flow as well from day one. But what I found is that over time you see good long term tenants, little maintenance and maybe a little bit better on the, the rent increase side too. So yeah, I think you should have both.

Yeah, it's a trade off for capital appreciation versus return versus you know, roi, return on investment and just hassle factor. The rehab properties, they always look better on paper. The C class properties always look better on paper. In real life though, you, you tend to get just a better quality tenant, better quality experience in the brand new property. So it's a trade off, you know, it's a trade off, you know, if you Want the, the benefits of the capital appreciation and everything else, you know, or you want the immediate gratification. So that's always one of the trades we always have to make with pretty much everything in life. Sarah, you want to close it out with anything on mindset.

You know, I just want to say that, you know, look, real estate investing is, it's not perfect, but we think it's better than anything else, you know, that you can do in comparison. And it's really important to just keep your big picture in mind. You're going to have some challenges, some bumps in the road along the way. We're here as your support team, so reach out anytime, but keep it positive. You know, really just continue to look at what your long term plan is. This is not a get rich quick. You're going to have the benefits of the cash flow along the way, but in the end the goal is to continue to grow. We didn't get a chance to talk about cash out refi vs 1031 exchange, but those are some topics we should discuss, perhaps on the next podcast.

Yeah, absolutely. A lot of the benefits of these investment properties, as most of you know, are like the iceberg, right? A lot of it's under the surface, including what I started Meet the Masters with, which is roa. Roa, you've all heard of roi, return on investment, but ROA is return on amortization. And that basically is the big boring idea. And you know, you don't notice it. You don't notice the tax benefits, you don't notice a lot of these multidimensional returns that you're getting every month, but they are there. Just like most of the iceberg is underneath the surface of the water. Just ask the captain of the Titanic. Now this is in a positive way, but no, look, it's there, there's a lot going on that really, really benefits you in your return. So that's good.

And just know that the deal today is not the deal forever, you know, because as you see appreciation, as you raise your rents, as you, you know, do refinance and lower your interest rate, you know, whatever, whatever it is, you can make little tweaks to your portfolio along the way. And so I've been working with Jason, with you for 12 years and I've just, it's just been really great to start with one property and now have several properties and seeing the rents go up and these deals are just getting better and better and some of them are providing infinite returns, I mean, literally. So continue to grow, reach out to Do a portfolio review with us. You know, we want to help you grow.

Good stuff. Well, hey, thank you, Sarah and everybody listening, thanks for joining us and happy investing.

Thanks, Jason.

Hey, I'm here with my good friend Julia and she is an expert in tax lien and tax deed investing. She will be speaking at our Savannah, Georgia Venture Alliance Mastermind event. And I'm really excited about this one because I learned about tax lien and tax deed investing way back in about 1997. And as many of you know, I started investing in tax liens and tax deeds back in around 2005. I got ripped off. I got ripped off pretty badly by a company. Don't want that to happen to you. So we have made the focus of this next upcoming Venture Alliance Mastermind retreat on May 17th in Savannah, Georgia on tax lien and tax deed investing. You know, some of my friends have done very, very well with this. In fact, Julia, you know, you don't even know this story, but a friend of mine bought an incredible property years ago in Aspen, Colorado, a very high end area, and got a tax sale deal that I would argue changed his entire life. It was incredible how good the deal was. I mean, it was a big property. He bought it for a song. So tell us a little bit about this. And you know, one of the things I think that's important for people to understand is it's not just about going out there and recklessly bidding and, you know, trying to make money. Of course, everybody wants to make money, but it's designing a strategy that's right for the investor. Different locations, different geographies offer different kinds of deals. Tax liens and tax deeds are two different things. Right. Tell us a little bit about this.

Tax liens and tax deeds. Obviously you're buying different things. And there's hybrid states, there's states that sell liens, there's states that sell deeds, and then there's states that sell tax lien certificates. And everything has a different strategy. When you invest, you kind of have to know beforehand what the timelines are, how much money you're going to have to bring to the table, what your competition is going to be. And once you know all these things and know what your resources are in terms of time, money and how long, you basically have the patience to wait. That's how you then scope out which locations you're going to go into.

Right, Right. Okay.

A lot of different pieces going together into the picture.

Tell us about you had a big success story. I mean, you've had several. But one of Them is really remarkable. Tell us about that story where you. I know you've got a video on that where you bought a house for what, about $1,000?

Oh, yeah, yeah. It's actually right here in Savannah. And that's not the only one. There's several. I bought a whole bunch here. And I show up at these sales sometimes. Nobody bids against me.

Wow.

So I get the property for the back taxes, which in My case was $800. One time was $1,500. And I did fix the house up a little bit, made it into an Airbnb rental, and it rents for 1500-2000amonth.

And you bought it for about a thousand dollars.

About $1,500.

Wow. Oh, my gosh.

And nobody bid against me. I was the only bidder.

Okay, so you bought a house, you now own it. Well, maybe you've refinanced it. I don't know. But initially you owned it free and clear and you paid for the house in one month.

Yeah.

From rental income. That is extraordinary. That is just extraordinary.

It's my favorite.

People have to be thinking, though, and, you know, there. There are infomercials on tax sale investing, and, you know, we've all seen them. Probably. People have to be thinking, you know, what's the catch? Yeah, what's the catch? What's the hard part of this?

The hard part is that people think that there's a catch, and they don't put in the effort to actually think about and study the market, study the properties, learn how to do your due diligence. And sometimes they fall on their face. First off, most people don't even believe that it's possible. And then when they do get into it, they just blindly buy whatever, and then they fall on their face and, you know, they lose their money because they might just buy a property that's really not worth anything, and then they get out of the market and leave. And that's when I come in and get all the good deals because everybody else has left.

Yeah. Okay, so what are we going to cover at the upcoming retreat? You and I did a very long Skype call where we. You really took me through, like, analyzing properties, looking at the online auction, and now this was for tax sales in Florida, looking at them, looking at how to bid, what to bid, whether you should look at a lien or a deed, and distinguishing between the lien, deed and certificate, the three different items, and then also picking which area you want to do this in. And each municipality, by the way, has different policies as to, you know, when you have to come up with the cash, how you bid, there's definitely some stuff to know on this. What are we going to cover at the, at the retreat?

I can take your participants through my analysis process on a small scale so we can look at that. I can cover some of the caveats that I always look at to avoid problem properties from the get go and kind of just take your participants through this thought process that I utilize that has been successful for me to find the good ones and make a system out of it. Kind of fill the pipeline.

Okay, now you mentioned earlier, and I don't know if we mentioned this on the recording or when we were talking for a moment off air about institutional investors being in this game and some of the auctions being much more competitive than others. Tell us about that.

Well, there's a lot of markets that are just, there's a lot of desire for real estate. They're just high end markets, like big metropolitan cities.

Sometimes smaller areas as well. You get banks that come in and just kind of have these really deep pockets and sweep everything off the table. But in some states, governments actually coordinate with institutional investors and sell properties in batches only. So you as an individual, you couldn't even just go buy one property. You'd have to buy the whole batch of 300 or something. And that's not affordable. So what I can cover is some of the states where it's a little bit more beneficial to go into for individual investors and also some states that probably should stay away from if you want to utilize this strategy.

Okay, good point. Good point. Well, hey, I look forward to seeing you there. It's May 17th in Savannah, Georgia. Beautiful Savannah, Georgia, which is where you live. It is a really cool town. If you have not been to Savannah, folks, even if you don't care about tax lien investing, just come to Savannah because it's a super cool town.

So it's the best time of the year to come as well. Before it gets too hot and too humid. It's beautiful right now.

Yeah, yeah, it is a gorgeous, gorgeous city. So we look forward to seeing you then. Thanks, Julia.

All right, bye.

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